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July 23, 2005

S GurumurthyBrinda Karat, a Left feminist, has criticised RSS chief K.S. Sudharshan for his views on the role of women. In Sudharshan’s view, a woman who puts the family above her career is the role model for others. Brinda chided him for being anti-women. For her, a family woman is subordinated. Conversely, a career woman is liberated. Sudharshan’s view and Brinda’s are not just a conflict of the ‘traditional’ India with the ‘modern’. Today, it involves the ‘modern’ West as well and a debate is on out there. Look at the facts and the thoughts on the role of women in the West, which our intellectuals of the Left and also of the rest generally benchmark.

Long before, the West had caught on to what the likes of Brinda now advocate for Indian women. The West, ideologically close to Brinda, moved even faster. In the Russian Federation, 65 percent of the marriages end in divorce. The divorce-to-marriage rate in the Ukraine is 63 percent, Czech 61 percent, the UK 51 percent, the US 49 percent, and Germany 41 percent. Swedish women are the most ‘liberated’ and ‘empowered’ with half and more of Swedish parliamentarians and civil servants being women. Is it just a coincidence — or consequence — that 65 percent or more of Swedish women and men live together without marriage, any one with anyone for any length of time? In the end, over two-thirds of Swedish elders are bereft of family support. This has forced the Swedish government to pass a law to provide caretakers, at its cost, for assisting the aged who are orphaned.

Look at the USA, which many look towards. The traditional arrangement where men go to work and women look after the house has fallen from 53 percent of married couples in 1972 to 21 percent in 1998. The divorce rate in the US has doubled between 1960 and 1998. Don’t dismiss it as merely a cultural fall. It is economic as well. The state had to step in to fill the void in families. So the social security cost, that is the cost of caring for the aged and the infirm, unemployed and others, has skyrocketed. Many in the West are frightened of this time bomb ticking under their economies. Some of the best minds in the US fear that the emerging ‘Fatherless America’, as one writer put it, will bankrupt the country.

In contrast, the entire social security cost is privatised in India through the traditional family mechanism. But for such traditional families the Indian state would have gone broke long ago. Now the West is realising the criticality of women who put home above career. A study made in 2003, covering over 100,000 families in the UK and the US, found all this: wherever men and women have competed and claimed arithmetical equality, families broke up; the happiness of families and their overall economic status stood eroded; wherever women had the full support of husbands and had been mothers taking care of the family, happiness in the family was complete; separation forcing women to remarry or remain single caused a drastic reduction in their overall happiness.

Look at the relatively more traditional Germany. An article in The Christian Science Monitor (March 25, 2005) reads: “In Germany, the idea that it’s possible to combine family life and a career is rejected by society as a whole,” argues Barbara Vinken, author of “The German Mother.” German society, she says, is increasingly split into two camps: those who have children, and those who don’t. “It’s a society in which a growing segment isn’t reproducing anymore.” The article goes on: “Sending your child (to day-care in order) to work is seen as something that weakens the family rather than strengthens it,” says Giscela Ehler, head of Familenservice, a childcare consultant based in Berlin. “Women,” she says, “feel that they have to choose between family and career.” Yet, only 16 percent of German women with children less than six go for work.

Now see the stunning decay in women’s status in the relatively traditional Germany. Like in all West the German government provides doles till employment is offered to the unemployed. An unemployed German girl receiving the dole was stunned when told by the employment office to either join a brothel that had jobs to offer her or, if she declined to, become disentitled to her dole! Why? As Germany had legalised prostitution as an industry, a job in a brothel was as good any other employment for women in market economics!

So the West is now debating what the ideal role of a woman should be. In the West, one abuses Barbara Vinken as anti-women or dismisses her as Biblical. Nor does anyone trivialise Giscela as medieval. What Sudharshan says in India is precisely what Barbaras and Giscelas say in Germany. So let us look at the debate in the West, developed and more than that, decaying — lest even as we replicate their development, we don’t bring in their decay. Sudharshan has a valid point. He never said women should not opt for a career. He only cautioned against idolising career women and trivialising the family-bound. In an intellectually spineless atmosphere, he has had the guts to raise a point, a profound one. Let us discuss it without being dismissive or abusive.

The press' reaction to the offer of CNOOC Ltd. for Unocal was predictable. The Wall Street Journal headline trumpets: "Meet China Inc.: Topping Japan Inc. Of the 1980s, Corporate China Shows Muscle." Really? The New York Times opines "China's Strength, U.S. Weakness." These headlines provoke images of a robust young economy in competition with an ancient spent force. The opposite is true.

But the offer by CNOOC Ltd. is not an example of the triumph of Chinese capitalism. Far from it. China does not have a market economy. The allocation of capital, interest rates, commodity prices, technology and the structure of the legal system are subject to the requirements of state owned companies. Chinese private companies and foreign owned companies run a distant second. The Communist government of the People's Republic of China has made it clear that it has no desire to give up the economic control it gains from this system. The problem is that the system, like command economies everywhere, doesn't work.

It is important to understand just what CNOOC Ltd. is. It is a Hong Kong incorporated company, whose shares are listed on the Hong Kong stock exchange. Some of its shares are also traded as ADRs (American Depository Receipts) on the New York Stock Exchange. It was created in February of 2001 by its parent, Chinese National Offshore Oil Corporation (CNOOC).

CNOOC was itself created in 1982 by the Chinese government. It has the exclusive right to enter into production sharing contracts with international oil and gas companies for petroleum exploration and production offshore China. Although CNOOC transferred its rights and obligations under these contracts to CNOOC Ltd., CNOOC Ltd. cannot enter into any contract with a foreign enterprise without their parent, CNOOC's, consent.

According to its web site, CNOOC is a state owned company. The problem is that we do not know exactly what the state is. State owned companies can mean many things in China. A state owned company can be owned by a city, a province, a ministry or the central government. This is enormously important, because the precise government organization, who owns the company, gets the power over the company, the patronage and all the benefits. With a large powerful company like CNOOC, this could be enormous. It is not unusual for the government to set up competing companies to redistribute a share of the spoils or the power.

CNOOC has whatever assets the state decides to give it or take from it. Contracts are not protected under the constitution and the courts are not an independent coequal branch of government. If tomorrow, the central committee decided to revoke all of CNOOC's contracts and rights, it could do so.

In theory CNOOC is governed by Chinese corporate law. This law is rather an interesting document, because it gives a lot of protection to shareholders. It is designed that way because of an attempt at reform in the early 1990s. The idea was to divorce government from management. So although the state owned company was still 100% owned by the state, it was supposed to have an independent management. The Chinese were faced with the same problem that owners face everywhere. Managers tend to cheat. Like Bernie Ebbers, they tend to represent their own interests, rather than the interests of their shareholders. In China, the shareholder was and is the state. So the state, to protect its interests, drafted a corporate law that was very shareholder friendly. What the state creates, the state can take away when it suits.

CNOOC has shareholders, directors, by laws, a board, by laws etc. but there is no reporting requirement, so we do not know exactly, who or what they are. They also can be changed at any time.

The state did give CNOOC its assets and CNOOC gave some of those assets to CNOOC Ltd. This was a solution to a problem for state owned companies. Most lose money, so they are always desperate for more capital. In order to get it, they hit on the idea of raising it on international equity markets. Their favorite way to do this is to create a subsidiary, usually incorporated in Hong Kong and subject to Hong Kong law. The subsidiary then does an IPO and sells a minority stake to shareholders from many countries. Sometimes these shares are traded in the US as ADRs, which makes the subsidiary subject to US jurisdiction.

Any protection that shareholders of CNOOC Ltd. may derive from Hong Kong or US jurisdiction is an illusion. CNOOC Ltd. has almost no US assets and CNOOC has none at all. Hong Kong may have a separate legal system, but it is still part of China. In order to enforce an award for securities fraud or breach of contract against CNOOC Ltd. or CNOOC the action would have to brought in China with no chance of success.

Also CNOOC Ltd. is a subsidiary of CNOOC, who owns 70% of CNOOC Ltd. If the merger goes through as proposed, CNOOC Ltd. will own 100% of Unocal. So Unocal would be wholly owned subsidiaries of CNOOC Ltd. Parents merge their subsidiaries into the parents all the time. The only protection minority shareholders have is the law of the local jurisdiction. China's record of protecting any property rights including the rights of minority shareholders has been dreadful.

This contrasts sharply with Unocal, which is an American corporation, incorporated in the US with US assets. Its books are subject to SEC scrutiny. Its assets can be seized. Its American employees arrested. If Unocal was purchased by CNOOC Ltd. much of that could change overnight, because CNOOC Ltd. could do anything it wished with Unocal. It could merge Unocal into CNOOC Ltd., so Unocal would no longer exist or it could reincorporate it in Hong Kong or even China. In either case, Unocal would no longer be subject to US jurisdiction. Any US assets, of course, still would be.

The Chinese, like almost ever other country on the planet, are concerned about their access to energy and other resources. Like the US, it needs to import oil to meet its energy needs. The difference is that China's leaders tend to view the world through a mercantilist perspective. Although rather common in Asia, the Chinese have used it to promote the strength of the party to the detriment of the rest of China's people.

Like other Asian nations they have suppressed domestic demand and manipulated their currency to encourage export growth. What is different is that they have deliberately favored small foreign owned enterprises over domestic private companies to achieve export growth. The advantage is that small foreign owned enterprises are expendable and will not be interested in local political power. The policy may have increased the power of the party, but it starved the most dynamic sector of the economy of funds and kept millions of farmers mired in poverty.

China's mercantilist strategy to gain oil might fail as well. From a strategic stand point, Unocal's reserves will not protect China's energy needs for two reasons. First, although Unocal's reserves are in Asia, to deliver them, they must be shipped by water across sea lanes patrolled by the US Navy. Second, these reserves are in someone else's country.

Most of Unocal's Asian reserves are in Indonesia. In addition, they have projects in Thailand, Bangladesh, Myanmar, Vietnam and Azerbaijan. The Indonesian gas project has long term contracts with Japan, South Korea, and Thailand that last for another five years. Many companies and countries have found to their dismay that long term contracts are not respected in China. So Unocal's customers may find themselves with a problem unless CNOOC decides to let Unocal remain an entity and keep it subject to US jurisdiction. If it does then the customers can find protection in the US courts. Unfortunately, they may not find any US assets to enforce their claims.

The Indonesians have expressed optimism that the Chinese will help in their exploration efforts. Other countries are not so sure. In Thailand, Unocal has contracted to supply the Thai state controlled national power company PTT. PTT is part of a government plan to rehabilitate the Thai Petrochemical Industry or TPI, which has been bankrupt since the Asian crises in 1997. TPI is the owner of Asia's largest petrochemical complex. TPI was subject to a recent bid by the Chinese conglomerate CITIC. CITIC backed off after a protest by the Thai government.

The Vietnamese are understandably wary about giving access to a valuable resource to a historical rival. Exports from Bangladesh were stopped after local objections. China is not the only country in Asia whose need for energy is growing. With the possible exception of Iraq, countries do not have to export their oil and gas.

Even though Unocal's reserves are not exactly available, China is still willing to buy them at the top of the market. This type of behavior is not an indication of strength. It is more a sign of strategic weakness and desperation. China has spent tens of billions of dollars to acquire oil and gas in Sudan, Kazakhstan, Venezuela and Peru. They have also attempted to purchase supplies or interests Yemen, Oman, Iran and Australia.

They are especially interested in supplies that can travel overland through expensive pipelines directly to China or oil that does not pass through American or European companies. China's President Hu Jintao has gone on diplomatic oil missions to Latin America, Africa and South East Asia. He will soon be on his third trip to Russia in an attempt to out flank Japan, so far unsuccessfully, for a large piece of Siberian oil.

One of the reasons for such desperation is that China guzzles energy at a rate that makes Hummer owners look positively green. Since China's state owned industries have no need to make a profit, they see no need to conserve expensive energy. China subsidizes petroleum prices to insure that its new car owners waste as much as possible on its new American inspired super highways. China consumes twice as much energy as India per dollar output, and between three and five times the energy per dollar output than the world average. They consume a staggering fifteen times more than the Japanese, who have been investing in energy efficient technology since the first oil shock in the 70's. If China could increase her energy efficiency just to the level of India, it could halve its demand.

The Chinese have belatedly woken up to the benefits of energy conservation. Unfortunately their command methods are about as wasteful as their energy use. This would be obvious to anyone who has used a public toilet in China. Instead of flushing when used, a constant stream of water wastes and pollutes thousands of gallons a day in a country that is desperately short. Shanghai has just announced that it is building a 100,000 kw offshore wind-power station, which will cost twice as much as an onshore station.

Decrees from the center also may not work as well as they once did when Mao ruled by terror. This summer Premier Wen Jiabao has dictated that air conditioners in government offices must be set no lower 78 degrees. The Premier's efforts may not have much success. Ten year old energy conservation guidelines have only a 10% compliance rate. Even market driven reforms like a proposed increase in the fuel tax run into political conflicts. Fuel taxes would replace road taxes collected by local governments, who are unhappy about ceding an important source of revenue to chronically deficit ridden Beijing.

The financial press, commentators and some politicians have been especially active in painting the recent spate of proposed purchases of US companies by Chinese companies as the triumph of 'Chinese capitalism'. The power of Chinese companies is either praised or feared, but never questioned. It should be.

Japan, South Korea, Taiwan and India have all used different methods of development. What is consistent among all three countries is that strong local private firms have been able to develop world class brands, international distribution, and new technologies without buying them from Western firms. When they are successful enough to purchase western firms, it is usually because they are augmenting their strengths, increasing their market share, or in the case of the Japanese during the '80s, to show off.

Toyota, Hyundai, Samsung, Wipro and Honda spent years perfecting their quality and building their brands. The result is a brand loyalty that translates into wider margins and more profits, not suicidal price wars.

In contrast, Chinese state owned 'national champions' buy from necessity. Lenovo bought the IBM brand because it could not develop one on its own. Worse, it is being beaten on its home turf by Dell and HP. At the end of last summer I could buy a Haier air conditioner for $99. This year the price has fallen to $74. Even with these heavily discounted prices, Haier still needs the Maytag and Hoover brands to penetrate the US market.

Chinese firms' failure to develop brands is in part a product of their failure to develop technologies. In a Foreign Affairs article published last year, George Gilboy, a senior manager based in Beijing, argued that the problem was the Communist Party. "With a few exceptions, Chinese firms focus on developing privileged relations with officials in the Chinese Communist Party (CCP) hierarchy, spurn horizontal association and broad networking with each other, and forgo investment in long-term technology development and diffusion."

Without a legal system, the only way that Chinese firms can protect themselves and their management is through connections with the people who make the decisions. The saying, who you know is far more important than what you know, has special meaning in China. Professor Huang in his book, Selling China, cites the example of Shanghai Automotive Industrial Corporation (SAIC) China's largest automobile manufacturer. SAIC used to buy its mufflers from Guizhou Honghu, because of their technological quality.

Rather than collaborate with Guizhou Honghu to develop a world class product, SAIC poured money into its developing its own muffler for political reasons. They were pressured by the Shanghai government, so it could create Shanghai jobs and increase Shanghai revenues at the expense of Guizhou, a Chinese province. Since it had the full support of Shanghai's mayor, later China's President, Jiang Zemin, profit and technology were secondary motivations.

Technology requires not only collaboration, but also communication. Communication requires free speech. Without free speech new ideas cannot be circulated and discussed. Without timely and accurate information, investors cannot determine and support the best research.

The absence of any intellectual property protection does not provide the incentive to develop cutting edge technology. In such an environment, it is hardly surprising that both export and domestic high-tech industries have become overwhelmingly dominated by foreign firms. If Chinese firms like CNOOC Ltd. need technology, like skills in deep water drilling, they have to buy it on the international markets for top dollar.

In attempting to buy an oil company rather than an oil asset, CNOOC Ltd. is heading into uncharted territory. Studies have shown that about two thirds of mergers fail to achieve the goals of the merger. This is true for Chinese companies as much as for their western counter parts. Like most Chinese companies, CNOOC Ltd. does not have a great deal of international management experience. Trying to buy it can cause problems.

Most mergers fail because of 'people' problems. The corporate cultures conflict. Power struggles emerge. Communications break down. The decision making process becomes paralyzed. Integrating two western companies with similar management styles can be very difficult. Integrating the corporate culture of an American private oil company with a Chinese state owned enterprise may be impossible.

CNOOC Ltd. has already had some experience with mergers. It purchased the Indonesian operations of the Spanish oil company, Repsol YPF, in 2002. The purchase has not exactly resulted in a merger. With the exception of three managers, the Chinese have basically left the operation alone. More indicative might be the joint venture between the French television manufacturer Thomson and the Chinese electronics company TCL in 2004. The new company, TCL Multimedia, became the world's largest TV manufacturer. Despite its size, manufacturing capabilities and domination of the Chinese market, TCL reported losses last quarter due to problems in Europe and North America.

If the risk of merger makes the acquisition of Unocal by CNOOC Ltd. look questionable, the price makes some investors question CNOOC Ltd.'s sobriety. CNOOC Ltd. is paying top dollar for a firm that is 70% of its own size based on Unocal's present market capitalization value, which has been bloated by the record price for oil. Worse, Unocal trades at almost thirteen times earnings compared with CNOOC Ltd.'s eight. This translates into a 60% premium for CNOOC Ltd.'s bid. The price of Unocal is also in US dollars. If the Renminbi really is undervalued, then the bid would reflect the distortion. For the price to make sense, you have to assume that the price of oil stays up and the value of the Renminbi stays down. If the price is questionable, so is the financing.

The first problem has to do with CNOOC Ltd.'s ability to consummate the deal at all. The directors of Unocal have very real concerns and are insisting on guarantees. As the Wall Street Journal pointed out, CNOOC Ltd. is listed in Hong Kong and has no US assets, few employees and virtually no US presences. Since the prospect of enforcing a contract in China against CNOOC Ltd. has basically no chance to succeed, Unocal is demanding that CNOOC Ltd. provide adequate assurances before it gives up the offer from Chevron.

Second, CNOOC Ltd. is getting $7 billion from its parent. $4.5 billion is in the form of a thirty-year loan and another $2.5 is in the form of a bridge loan to be repaid by an equity issue in two years. CNOOC Ltd.'s parent, China National Offshore Oil Corporation is an unlisted state owned enterprise. It is not required by anyone to reveal its finances. It would be interesting to know where CNOOC Ltd.'s parent came up with $7 billion. Was it just lying around? Invested in US treasuries? Or will it come from state treasury or worse from a state-owned bank. We will probably never know.

Of course, part of the money that CNOOC Ltd. is a bridge loan to be repaid in just two years. The loan is to be repaid with the proceeds of a $2.5 billion stock issuance. This assumes that oil prices remain high, the markets continue to want Chinese stocks and the world markets are not in a recession. Three large presumptions.

The third issue has to do with the $6 billion loan from Industrial and Commercial Bank of China (ICBC). This seems like a lot of money coming from a bank with a nonperforming loan ratio of 19 percent making it technically insolvent. ICBC has been able to lower its nonperforming loan ration to 19% by dumping on their dud loans onto their asset management company, Huarong (AMC). The problem is that the Huarong buys these questionable loans at face value using its own bonds. The AMC has to pay back the bond with money earned from the disposition of the assets, which is not happening. Besides bad loans, ICBC has some venal employees. The bank recently lost a mere $893 million through embezzlement.

Fourth, another $3 billion is coming from a bridge loan provided by CNOOC Ltd.'s investment bankers, Morgan Stanley and Goldman Sachs. Goldman Sachs recently revealed that it was considering a $1 billion equity stake in ICBC, no doubt to be secured by Unocal's oil assets. Goldman Sachs is also represented on CNOOC Ltd. board. Kenneth Courtis, vice-chairman of Goldman Sachs in Asia is one of its non executive and, theoretically, independent directors.

The real description of this deal is a world away from the present hype. The truth is something quite different. This bid is about CNOOC Ltd., a Hong Kong listed subsidiary of a Chinese state owned company, which has no assets and virtually no legal presence in the U.S. It is trying to buy a US oil company, Unocal, whose capitalization is 70% of CNOOC Ltd.'s. The bid is a 60% premium at a time when oil prices are at record levels and the Chinese currency is kept artificially low against the dollar. CNOOC Ltd. has limited experience with mergers, which fail two thirds of the time regardless of the parties. If the deal goes through, China will get oil and gas properties that are located in other countries, which might prohibit export. If they allow export, the oil and gas is contracted to other countries for the foreseeable future. To pay for the deal, CNOOC Ltd. is using money from an insolvent bank. The money loaned by its parent comes from an unknown source. Part of the loan is to be paid for from an equity float on a potentially moribund stock market. The rest of the money is to be provided by one of the advisors, an investment bank, with a seat on CNOOC Ltd. board, which is considering purchasing a stake in the insolvent bank. This is not muscle. This is a mess.

This is not a disaster for the United States. It is not even a strategic threat. On the contrary, the main beneficiaries are Unocal's shareholders. US investment bankers, who have advised and underwritten the deal, stand to make tens of millions. It is a disaster for CNOOC Ltd.'s minority shareholders. These minority shareholders include many small American investors, who own pieces of mutual funds that they assume are invested in safe assets or the prospect of an ever growing China. It is a disaster for CNOOC Ltd. bond holders, who will lose when S&P down grades their rating. However, the people who will be affect most will be the Chinese, ICBC's depositors, if the bank does not get paid back, and Chinese taxpayers, who ultimately will have to bear their leaders' folly.

It is likely to damage something else, China's reputation as an ever growing money machine. If this merger is consummated, it is highly unlikely to make money. A failed merger would make it more difficult for Chinese firms to raise capital on international markets, at least without a substantial premium. As capital dries up the people who will be harmed the most will be the Chinese and their Communist government.

Rather than feeling concern, then, the US authorities should look to the recent example of China Life for some idea of the perils such Chinese adventures may encounter. China Life, unlike many other Chinese state owned companies, did not bother with a Hong Kong IPO. They went directly to New York where the big money is. Their IPO was an enormous success, raising billions. The problem was that it exposed China Life to US laws. When it was later revealed that China Life had failed to disclose a 'slight' problem involving $658 million, China Life became liable. They were exposed to the most clever, cunning, ruthless, destructive force known to the marketplace, US plaintiff securities lawyers. Given the basics of CNOOC Ltd.'s bid, it will only be a matter of time before a feeding frenzy proves to the Chinese leadership the real power of the United States and her laws.

William B. Gamble, President of Emerging Market Strategies, appears regularly in the business media and is author of Investing in China: Legal, Financial and Regulatory Risk(Quorum Books, 2002).

On April 24 a Taiwan intelligence source disclosed [1] what has now been expected for several years: in 2005 the People’s Liberation Army (PLA) will begin to deploy the first versions of its new 1,000km+ range subsonic-speed strategic land attack cruise missile (LACM). For the PLA both the development of long-range LACMs and defense against U.S. LACMs have been a very high priority. In development since the 1970s, China’s new LACM is expected to approximate the performance and tactical flexibility of the U.S. RGM/UGM-109 TOMAHAWK and eventually will eventually be fielded in ground, submarine, ship and air launched versions. This means a new stage of power-projection for the PLA—global non-nuclear strike.

LACM Development

China has long employed cruise missiles for naval attack missions, building three families of anti-ship missiles. These include two series of anti-ship missiles which derive from the early pioneering Soviet P-21 STYX anti-ship missile developed in the late 1950s. One series starts with the small (Hai Ying-HY) HY-1, basically a copy of the STYX, and extends to longer range rocket and turbojet powered variants. For example, the (Ying Ji-YJ) YJ-6 is an air-launched variant with 100km and 200km range versions. The (Fei Long-FL) FL series includes subsonic and supersonic rocket powered anti-ship missiles. There are indications that there are air-launched versions of this missile as well. A third family is based on technology obtained from French Exocet anti-ship missiles and include ship, submarine and air launched versions of the rocket-powered 40km range YJ-81 (C-801) and the 120km range turbojet-powered YJ-82 (C-802). There are reports of a development of this missile called the YJ-83 with a 250km air-launched range. This missile, plus a version of the YJ-6 may be equipped with terminal seekers to enable precision ground attack. The submarine launched versions of the YJ-81 and YJ-82 are launched via canister, and thus provide a technological base for future submarine launched LACMs.

The C-802 is an turbojet-powered anti-ship missile that is not co-produced in Iran. Credit: RD Fisher

This model of the sub-launched version of the C-802 was distributed at the 2004 Zhuhai Airshow. It demonstrates that the PLA has mastered capsule launch technology which it can also use to launch LACMs from its submarines.

PLA interest in strategic cruise missiles dates back to the 1970s, when the U.S. and the former Soviet Union began developing these long-range, accurate and relatively inexpensive weapons. The Chinese believe there is a 9:1 defense-offense cost ratio advantage for developing and maintaining cruise missiles over the cost of defending against them.[2] LACMs also cost about one third the price of a short-range ballistic missile. The successful U.S. employment of non-nuclear aircraft and ship-launched cruise missiles during the 1990 war against Iraq spurred more intensive development by the China Aerospace Corporation’s Third Academy, the chief designer/producer of Chinese cruise missiles.[3] The Third Academy has since moved under the management of the China Aerospace Industries Corporation (CASIC), formed after 1998 to promote competition within the PLA weapons sector.

The PLA has invested heavily in all aspects of cruise missile design, guidance, and power plants. According to Third Academy officials a future Chinese cruise missile will have multiple guidance systems, like terrain-following (TERCOM) and satellite navigation systems[4] that will enable very high accuracy. In the late 1980s Third Academy engineers produced a study on combining guidance systems for cruise missiles. In 2002 these officials noted that they had mastered TERCOM technology long ago.[5] Their apparent success in mastering this complex technology is a testament to the priority and resources devoted toward LACM development.

By the late 1980s the Third Academy was testing experimental LACMs like the X-600, pictures of which were revealed in 1999.[6] Other unconfirmed Chinese reports indicate the PLA developed, and even fielded initial versions of LACMs in the mid 1990s.[7] Some sources call this LACM series "Hong Niao," though the most recent PLA LACM is referred to as the "Dong Hai," or DH-10. Internet source photos of purported LACM transporter-erector-launchers (TELs) indicate that land-based version will use truck platforms. Their light weight allows for air-transport should the PLA demand rapid and long-distance deployment. New LACMs are also expected to be launched by PLA Air Force bombers, like new versions of the Xian H-6 and by the PLA Navy’s new Type 093 nuclear powered attack submarine (SSN).

This picture, which emerged on Chinese television in the late 1990s, is believed to be the X-600, a test bed for LACM development that may have flown in the early 1990s. Credit: CCTV

According to various reports, the range for new PLA LACMs extends from 1,200km up to 4,000km. And like PLA short range ballistic missiles (SRBMs), new LACMs can be expected to be armed with a variety of warheads. These could include tactical nuclear warheads, high explosive, thermobaric or directed energy warheads. The later might include high power microwave (HPM) warheads, which have received great attention by the PLA.[8]

To guide and target its LACMs the PLA is investing in multiple reconnaissance and navigation systems that will eventually allow global LACM employment. Targeting against Taiwan will soon be assisted by new medium range unmanned reconnaissance aircraft in development. The PLA is also building new Russian-designed electro-optical and radar satellites to provide "realtime" imagery of prospective targets. PLA LACMs are expected to use Russian GLONASS or European GALILEO navigation satellites to provide continuous navigation signals that will enable pin-point strike accuracy comparable to the U.S. TOMAHAWK. China is a "full partner" in the European Galileo navigation satellite constellation, which may be operational by the 2008 to 2009 time frame. By this time the PLA is also expected to have lofted its first Russian-designed high resolution electro-optical and radar satellites.

China has invested heavily in space and airborne surveillance systems that will provide global targeting data for new LACMs.These include new radar satellites, new electro-optical satellites and new UAV reconnaissance systems. Credit: RD Fisher

In early 2003 the first Chinese-source picture emerged to confirm the direction of PLA LACM development. While the picture showed only a partial LACM fuselage and wing assembly in a stress-testing rig, it confirmed the PLA LACM’s broad similarity to U.S. and Russian LACM designs. Chinese press reports note that in early August 2004 a test for a "new missile" capable of "extreme precision" was attended by none other than Defense Minister Cao Gangchuan, who as former Director of the Central Military Commission’s General Armament Department, would have exercised leadership over cruise missile developments during most of the last decade.[9] Other reports note this was a test for a new strategic cruise missile, or what is referred to as the DH-10.[10] These reports at least add credence to Taiwan intelligence statements that the PLA’s deployment of LACMs is imminent.

This is the clearest picture available from open sources indicating the progress the PLA has made in developing a modern LACM. This shows a fuselage and wing assembly in a stress testing rig, and the picture is probably from a brochure from the testing organization. It confirms earlier estimation that a PLA LACM will bear a distinct resemblence to current US and Russian LACMs. Source: via Internet

Foreign Cruise Missile Technology Sources

The broad similarity of the 2003 picture of a PLA cruise missile and existing U.S. and Russian designs is not surprising given the intense PLA effort to acquire foreign cruise missile technology over the last 15 years.

Russian and Ukraine From Russia and the Ukraine the PLA has obtained substantial modern cruise missile technology. In 1997 sources in Taiwan reported that Russia had marketed its Kh-65SE cruise missile in China.[11] At the time this was alarming because the Kh-65 was a proposed short-range version of the Kh-55 (AS-15 ‘Kent’) 3,000 km-range strategic cruise missile. The Kh-55 has been in Russian service since 1984 as a nuclear-armed air-launched cruise missile. They have the same inertial and terrain-following guidance but the latter may also have GLONASS satellite navigation capability.[12] It was feared that from the Kh-65SE China could obtain several technologies to build Tomahawk-like cruise missiles with potentially as much tactical flexibility. China would gain much desired cruise missile design, engine, fuel and guidance technology.

But it has recently been revealed that these fears became even more real. According to Ukrainian investigators, in April 2000 Ukrainian defense officials, assisted by Russian, sold China at least 6 Kh-55 LACMs[13] out of hundreds left in the Ukraine after the fall of the Soviet Union. Revelations last February held that former Ukrainian President Leonid Kuchma knew of but concealed knowledge of this sale.[14] However, some sources believe there is a good possibility that Ukrainian officials sold more than just 6 Kh-55s to China. Between 1980 and 1987 over 1,000 Kh-55s were produced in Kharkiv. In addition, the Kh-55’s R95-300 turbofan engine was also produced in the Ukraine.[15] Besides technical information about the Kh-55 the Ukrainians may be a source of design advice, inasmuch as they have reportedly developed a new version of the Kh-55. Called the Korshun, this Kh-55 development features a fixed engine at the end of the fuselage, versus the Kh-55’s podded engine which deployed under the rear fuselage.[16] As such, the Korshun offers advantages of simplicity and proves that Ukrainian engineers have the competence to assist in many aspects of LACM design.

The AS-15 is a Soviet era strategic LACM. The Ukraine is believed to have sold 6 or maybe more AS-15s to China in 2000. However, the Ukraine has modified this LACM, raising the possibility of having sold China more than just the missiles. Access to AS-15 technologies would have provided the PLA LACM with a crucial boost. Credit: via Internet

In addition, there are reports that the PLA has purchased the Russian Novator 3M-14E[17], a recently revealed land-attack version of the 300km range 3M-14E1 anti-ship missile. This missile is part of the "CLUB-S" package for China’s new batch of eight KILO 636M submarines. This is a cruise missile that while smaller, resembles the U.S. TOMAHAWK in shape, and is small enough to be launched from a standard 533mm torpedo tube. It uses navigation satellite signals for mid-course guidance and a radar for terminal attack.[18] Use of a radar for guidance pre-supposes the user has detailed three-dimensional imagery-derived digital data on the target.

It is possible that Novator would sell China considerable technical expertise as part of any weapon sales package, which might then be applied to Chinese-designed LACMs. But in the 3M-14E the PLA would not gain only an actual weapon for use against Asian land-based targets, including US and allied forces, it would also gain considerable experience in applying Russian operational and targeting doctrine and tactics. Novator is also marketing a land-based version of the 3M-14E which carries seven missiles per TEL vehicle. However, China’s reluctance to purchase Russian SRBMs like the Iskander-E may point to a similar reluctance to purchase a land-based version of the 3M-14E while China is investing heavily in its own LACM programs.

Novator's new LACM is reported to have been sold to China, initially to arm new KILO submarines that will soon arrive in China. This LACM also comes in a ground-launched version, shown here. Credit: RD Fisher

Israel In 1995 Flight International reported that China was providing funding to develop an air-launched cruise missile based on the TAAS DELILAH anti-radiation attack-drone.[19] The report noted also that China would be a customer for the new cruise missile. Reports of this co-development program persist though no official or unofficial statements confirm that China has yet received the cruise missile product of this cooperation. TAAS began promoting a warhead-equipped version as a stand-off cruise missile in 1995.[20] It is reported that a deep-penetrating warhead is being developed for the new Chinese version of the DELILAH.[21] In is also noteworthy that the U.S. Navy may buy a version of the DELILAH to arm helicopters.

In the early to mid-1990s Israel is reported to have sold to China some aspect of its then new DELILAH anti-radar missile, which was subsequently developed into a LACM.

The DELILAH is reportedly based on the Northrop MQM-74 Chukar target drone which first flew in 1965. It has been in Israeli service since the late 1980s as an anti-radar system. It is powered by a Williams Co. J400-WR-401 turbojet engine, producing 170 lbs of thrust.[22] Larger Williams Co. turbojets also power the longer-range TOMAHAWK and Air Force ALCMs. Versions of the DELILAH are equipped with aircraft-simulating features and electronics to trigger enemy radar transmissions, which are then located and attacked with ECM or chaff. If the DELILAH has been acquired by the PLA, it would have provided a new electronic attack weapon and another source of potentially useful cruise missile technologies. If, as reported, the PLA funded the development of later versions, it is logical to assume that the PLA was given those technologies. It is possible that the PLA would have benefited in the areas of design, engines, fuel, and guidance.

United States In addition the PLA has aggressively sought American cruise missile technology in the form of U.S. TOMAHAWK cruise missiles, or parts thereof, lost during conflicts in Iraq, Bosnia and Afghanistan.[23] Both Saddam Hussein and the former Taliban regime in Afghanistan are believed to have traded U.S. TOMAHAWK parts to China in exchange for military and diplomatic support. Other types of U.S. technology may be aiding China’s cruise missile program. There are also reports that the PLA has converted U.S.-made Boeing 737 transport aircraft to support new strategic cruise missile testing. At least one report notes that the U.S. is investigating the possibility that the conversion of the Boeing 737 for military purposes represents an illegal diversion of U.S. technology, which could lead to economic sanctions against China.[24]

This is the latest version of the U.S. Navy's TOMOHAWK LACM. The PLA is suspected of having purchased parts of destroyed TOMOHAWKs from several countries to which they have been delivered in the last 15 years. Credit: RD Fisher

LACM Deployment and Usage

It is likely that the initial user of the PLA’s new LACM will be the Second Artillery, the PLA’s dedicated land-based missile service. It can also be expected that Second Artillery LACMs will be deployed in the same manner its DF-15 SRBM brigades. However, they may also be deployed by the PLA Air Force at about the same time, inasmuch as the PLA has resumed production of the Xian H-6 (Tupolev Tu-16) bomber modified with four missile launch pylons. When the first Type 093 SSN becomes operational with the PLA Navy in the next year or so, it could also go to sea armed with a sub-launched version of the new LACM.

Very recently the Xian Aircraft Company has resumed production of the H-6, a copy of the obsolete Soviet-era Tu-16 medium bomber. This time the H-6 is being built with four wing pylons. For lack of a better platform, the PLA appears to be turning the old H-6 into a cruise missile carrier, as the U.S. and Russia have done their older bombers. Credit: Via Internet

Initially it is expected that new LACMs will be deployed primarily against Taiwan. Reports indicate that starting in late 2005, about 200 new PLA LACMs could be deployed by late 2006[25] indicating a possible build-up rate of 200 per year. By 2006, with the expected deployment of 800 short-range ballistic missiles (SRBMs) the PLA could field a combined force of 1,000 SRBMs and LACMs. And if annual production patterns of 100 SRBMs and 200 LACMs persist their combined number could reach 2,000 by 2010. The most likely rationale for such a build up is to saturate and overwhelm Taiwan’s planned U.S.-made PATRIOT PAC-2 and PAC-3 missile defenses and provide the PLA a sufficient missile strike reserve to carry out multiple waves of missile attacks against military and civilian targets.

But this capability equally threatens U.S., Japanese and Indian forces as LACMs will eventually be carried to distant operating areas by Type 093 nuclear attack submarines. When connected by communication satellites, PLA submarines will be able to upload initial targeting date into their LACMs derived from satellite imagery processed back in shore bases, and then ensure guidance to assigned targets via navigation satellite signals. As such, Type 093s could launch non-nuclear armed LACMs against distant U.S. bases in Guam, Hawaii or the U.S. West Coast. Should PLA Navy supply ships gain regular access to Cuban ports—as did former Soviet Navy ships—or event to other South American ports, that presents the possibility of the PLA Navy being able to support Type 093/LACM operations against the U.S. East Coast. It would certainly be to the PLA’s advantage to use LACMs armed with electromagnetic warheads to wreak havoc with U.S. military and civilian communication networks as a prelude to military operations.

This artists projection from a Chinese popular military magazine shows two Type 093 SSNs and a Type 094 SSBN. The 093 in the background is depicted having launched a cruise missile. When PLA Navy Type 093 begin to carry China's new LACM that will signify the beginning of a new era for Chinese miltiary power projection. Credit: Via Internet

The U.S. now employs discrete and highly targeted LACM strikes to attack known or suspected terrorist redoubts. Therefore it is reasonable to assume that China will someday use distant LACM attacks for political gain. Such attacks may be used to eliminate a potential rival to a regime under Beijing’s sway. Even the threat of such an attack, wielded on behalf of the incumbent, could serve to deter such rivals. Such a capability might be used to advance China’s political and economic interests in distant unstable countries like the Sudan, or to influence political evolutions in Central Asia, South Asia, Africa or the Persian Gulf.

A New Proliferation Challenge

Given China’s history of selling cruise missile technology to other states, the advent of PLA LACMs presents yet another Chinese proliferation challenge. For example, the PLA has sold C-802 turbojet powered cruise missiles technology to Iran, which now produces its own version, known as the Tondar. Iran would be a likely customer for future LACM technology. China has sold Pakistan extensive solid-fuel short and medium range ballistic missile technology. It is reasonable to expect that China will also sell Pakistan LACM technology, especially if there is any hint that India is developing LACMs or purchasing them from Russia, as it probably is. Guidance and engine technologies for LACMs would also be useful in developing new generations of medium and long-endurance UAV reconnaissance aircraft. It should also be expected that China will develop and market these new UAVs to a broader range of countries. For example, a country like Brazil, which has had previous ambitions to build nuclear missiles, but faces current financial hurdles, might be attracted to cheaper strategic cruise missiles, which could receive a potential assist by means of new Chinese UAVs.

Future Directions

Again following the example of the U.S. and Russia, China is also interested in developing supersonic or even hypersonic cruise missiles. With ever higher speed, cruise missiles become less and less vulnerable to gun and missile-based defenses. With this capability the U.S. views high-speed cruise missiles as a "next generation" weapon. However, the development of powerful but efficient ramjet or "scramjet" engines in a small enough size package is a daunting task. The U.S. Navy is currently developing a Mach-3 supersonic cruise missile which it hopes can supplement the TOMAHAWK before the end of the decade. In addition the U.S. is developing hypersonic, or Mach-7+ cruise missiles, but their deployment as weapons remains distant.

Russia has had a hypersonic cruise missile program for a number of years, and Russian technicians believe that hypersonic cruise missile will emerge in the next decade.[26] Russia is now the PLA’s primary potential foreign source for this technology. In early May 2005, a Russian report noted that the second Chinese-Russian high-speed UAV conference was held in Beijing. At this conference the Chinese side expressed their desire "…to develop hypersonic UAVs jointly with Russian companies."[27] Such technology could be applied to large aircraft for reconnaissance or strike missions, but perhaps more readily applied to smaller cruise missiles.

[2] For an early but still useful analysis of the PLA’s programs and institutes associated with cruise missiles see, Mark A. Stokes, China’s Strategic Modernization, Implications for the United States, U.S. Army War College: Strategic Studies Institute, 1999, pp., 79-86.

-----------------------------On 10 July 2005, the Sunday Times carried an important front-page story on a leaked British Government study 'Young Muslims and Extremism' (see our Media Review for more details http://www.j-n-v.org/London_Blasts/L_B_rapid_rebuttal_050710_part2.htm ). The key element of this story (buried in the middle of the article) was the finding that it is British foreign policy that has been responsible for the growth of 'extremism' - the willingness of young Muslims to participate in anti-Western terrorism.

This joint Home Office/Foreign Office report can be downloaded from the Sunday Times website in full, in four parts. What follows are the conclusions of the report.

Notice that when discussing the factors that cause 'extremism' among young Muslims, foreign policy is listed first. Second is 'Islamophobia'.----------------------------------EXCERPTS FROM THE REPORT

Definition:

By extremism, we mean advocating or supporting views such as support for terrorist attacks against British or western targets, including the 9/11 attacks, or for British Muslims fighting against British and allied forces abroad, arguing that it is not possible to be Muslim and British, calling on Muslims to reject engagement with British society and politics, and advocating the creation of an Islamic state in Britain.

Factors:

At this stage all we can say is that there are a variety of issues that impact upon British Muslims, including young Muslims, and may increase the likelihood of their moving towards extremism . The factors discussed below are based partly on survey evidence but partly on the subjective impressions of Home Office and FCO officials and Muslim advisers, taking account of their contacts with Muslim leaders, clerics and academics and monitoring of publications.

Foreign policy issues

It seems that a particularly strong cause of disillusionment amongst Muslims including young Muslims is a perceived `double standard' in the foreign policy of western governments (and often those of Muslim governments), in particular Britain and the US. This is particularly significant in terms of the concept of the "Ummah", i.e. that Believers are one "nation". This seems to have gained a significant prominence in how some Muslims view HMG's [Her Majesty's Government's, ie British Government] policies towards Muslim countries.

Perceived Western bias in Israel's favour over the Israel/Palestinian conflict is a key long term grievance of the international Muslim community which probably influences British Muslims.

This perception seems to have become more acute post 9/11 . The perception is that passive `oppression', as demonstrated in British foreign policy, eg non-action on Kashmir and Chechnya, has given way to `active oppression' - the war on terror, and in Iraq and Afghanistan are all seen by a section of British Muslims as having been acts against Islam.

This disillusionment may contribute to a sense of helplessness with regard to the situation of Muslims in the world, with a lack of any tangible `pressure valves', in order to vent frustrations, anger or dissent.

Hence this may lead to a desire for a simple `Islamic' solution to the perceived oppression/problems faced by the `Ummah'- Palestine, Iraq, Chechnya, Kashmir and Afghanistan.

A case in point is the March 2004 ICM poll of Muslim opinion asked "Jenny Tonge, a Liberal Democrat MP said she condemned all forms of terrorism, but if she had to live in the same situation as a Palestinian she might consider becoming a suicide bomber herself. Do you agree or disagree with her?" 47% agreed with the statement, whilst 43% disagreed.

Domestic issues

Islamophobia

Perceived Islamophobia (particularly post-9/11) in society and the media may cause some British Muslims including young Muslims to feel isolated and alienated and in a few cases to reject democratic and multi-cultural values.

The Cantle report identified polarisation between Pakistani/Bangladeshi and white communities as a factor in the 2001 disturbances. The young people involved in these disturbances included educated professionals as well as under privileged people.

Lack of understanding of Islam - insensitive use of language and perceptions of Islam and an ill-informed assumption that Islam's teachings are inherently extremist. Media coverage of extremist fringe groups increases this.

Muslims' perception of bias in the way counter-terrorism powers are used to stop, detain and arrest people, both at ports and in-country.

Social issues

Attainment

Muslims are more likely than other faith groups to have no qualifications (over two fifths have none) and to be unemployed and economically inactive, and are over-represented in deprived areas. However, this is largely associated with the disadvantage of the Pakistani and Bangladeshi communities, whereas the experience of Indian and Arab Muslims is much less disadvantaged .

Lack of participation and representation - There is still low Muslim representation in mainstream institutions of influence, especially for women - eg in public appointments, volunteering and mainstream politics (although the Home Office Citizenship Survey 2001 suggests that low Muslim participation rates largely reflect non-faith factors such as education, economic empowerment, age and gender).

Issues of identity

Parts of the Muslim community are still developing an understanding of how to reconcile their faith and Islamic identity with living in a secular multi-cultural society, and with modern social challenges. There is a developing critique by some within the Muslim community, both abroad and here, that traditional Islamic jurisprudence is not equipped to fulfil the needs of Muslims living in the West and needs to be developed and updated. There are tentative moves towards developing Islamic jurisprudence for Muslims living in Europe and the Western World.

A lack of any real `pressure valves', in order to vent frustrations/anger/dissent.

There are particular issues for young Muslim women who face some of the most complex clashes of culture. We need to think hard about the positive impact they can have with the right support.

Organisational issues

Some young Muslims are disillusioned with mainstream Muslim organisations that are perceived as pedestrian, ineffective and in many cases, as `sell-outs' to HMG.

The government must make a more concerted effort to persuade the Muslim community that it is trusted and respected . That requires a change of language. Public challenges to Muslims to decide where their loyalties lie are counterproductive.

ISN SECURITY WATCH (21/07/05) - The Saudi government announced on Wednesday it would replace its ambassador to the US, Prince Bandar bin Sultan, with the country’s envoy to Britain, Prince Turki al-Faisal, who previously was his country’s intelligence chief and in that capacity met several times with al-Qaida leader Osama bin Laden.

The appointment comes at a crucial time for Saudi-US relations, which are once again on the upswing following tensions after the 11 September 2001 attacks.

Fifteen of the 19 hijackers who crashed planes into the World Trade Center in New York, the Pentagon near Washington, and a field in western Pennsylvania were identified as Saudi nationals. Much of the membership of al-Qaida, the group blamed for the attacks, was also Saudi, as was bin Laden.

The Saudi government was accused of not doing enough to crack down on Islamic militancy within the country. It also was accused of financing Islamic religious schools (madrassas), worldwide, which churned out youths who would take up arms to fight alongside their Muslim brothers in Kashmir, Chechnya, and Bosnia.

Turki, who was the Saudi intelligence chief until one month before the 9/11 attacks, had maintained close ties with bin Laden and much of al-Qaida’s leadership. By his own admission, he met them on several occasions in the 1980s, during the US-backed war on Soviet-occupied Afghanistan. Those links are now believed to be severed, and Turki has since described al-Qaida as “an evil cult”.

In 1998, he tried - unsuccessfully - to have bin Laden extradited from Afghanistan where the al-Qaida leader was living at the time.

When asked about Turki’s links to terror groups and bin Laden, US State Department spokesman Adam Ereli told reporters on Wednesday the issue was no longer relevant.

“I think those issues have been dealt with,” he said. “And we expect that he will be the representative of the government of Saudi Arabia, and we look forward to working with him as the representative of the government of Saudi Arabia,” he said.

Turki, who is 60 years old, was appointed Saudi intelligence chief in 1977. He was replaced in August 2001. Since January 2003, he has served as the kingdom’s envoy to London.Relations on the mend

Relations with Washington are on the mend primarily because of the Saudi crackdown on militant groups. Last year, Saudi Arabia was the scene of several attacks on Western targets, but over the past six months has captured or killed a number of al-Qaida members, including its top leadership.

Those victories, along with some minor political reforms pushed by the Bush administration as part of its agenda to press for political change in the broader Middle East, has helped mend ties.

Turki replaces Bandar, the dean of Washington’s diplomatic corps, who was seen as a close confidant of several US presidents, lawmakers, and policymakers. He was the Saudi ambassador to Washington for 22 years and played a key role in the first Gulf War when Saudi Arabia sided with the US to expel Saddam Hussein’s army from Kuwait.

The Saudi government announced the decision in a statement, but provided no reason for Bandar’s resignation. President Bush, in a statement, wished him a “fond farewell”.

“In troubled times US presidents past and present have relied upon Ambassador Bandar’s advice,” Bush said. “In good times, they have enjoyed his wit, charm, and humor. Throughout his tenure Ambassador Bandar has remained a close, steadfast friend to the United States.”

At the State Department, Ereli called him “a great friend and valued adviser, valued confidant of many secretaries of State, as well as other State Department officials who have worked on behalf of this very important relationship”.

He said he did not expect the relationship between the two countries to change now that Bandar, a staunch advocate of closer ties with the US, was leaving.

“That relationship is going to continue to evolve and continue to grow and continue to develop with a new ambassador,” Ereli said. “And I wouldn’t expect the departure of Bandar or the arrival of Prince Turki to cause a blip in how we deal with each other.”

Turki was born in the holy city of Mecca and is the brother of Saudi Foreign Minister Saud al-Faisal. He was educated at Princeton and Georgetown Universities in the US, and at Cambridge in Britain.(By Krishnadev Calamur in Washington, DC)

Evangelists are targetting the sacred site of Tirumala and in a direct affront to the Hindu community, which has for centuries regarded all seven hills as holy, have starting gathering on the slopes in groups for public prayers. Even though an officer of the State-controlled Tirumala Tirupati Devasathanam (TTD) which manages the world famous Venkateshwara temple has denied that a missionary society has submitted a proposal to build a church on the hills, there is widespread disbelief on account of the known biases of Chief Minister Samuel Reddy.

The denials by TTD special officer A.V. Dharma Reddy follow reports in leading Telugu newspapers such as Eenadu and television channels like ETV, Teja TV, Gemini TV and Sun TV. Former Chief Minister Chandra Babu Naidu, who was reportedly tipped off by informed sources in the Secretariat, has strongly condemned the move, as has the state BJP.

What lends credence to Hindu fears is the despicable statement by the Government official that the TTD temple owns only 10.33 sq. miles of land on the hills, and this land is administered by the mandir trust. This is a transparent ploy to deny the sacred character of all seven hills in their entirety, and restrict the sacred site of the Hindu community to the formal boundary of the extant temple of Lord Venkateshwara.

Clearly we are witnessing the development of a major assault upon one of the most venerated sites of the Hindu community. Should it happen, it will be a desecration at par with that of the Mylapore Shiva temple in Chennai. Hitherto, there has never been any question of a structure other than the shrine of Lord Venkateshwara on these hills, and it bears remembering that it is the hills that are holy and not merely the mandir which adorns them. For instance, a temple along a busy thoroughfare would be holy, but the adjacent land would not be deemed sacred.

Thus, the attempt to limit the sacredness of Tirumala to the boundary of the temple, i.e. 10.33 sq. miles, is suspicious and suggests that the State Government may be preparing the ground for landing over land to a church body on one of the slopes. This is consistent with the systematic defilement of Hindu institutions since the UPA became ascendant in national life, as witnessed in the harassment of the Kanchi Shankaracharya and Bal Shankaracharya, and attempts to take over prominent Hindu temples.

What lends urgency to Hindu fears is the fact that six large churches have already sprung up on the road to Tirumala (Bye-pass road and new Bye-pass road) that leads to Alipiri, the foot of the hills. It is therefore imperative that the State Government recognize the entire seven hills as the sacred abode of Shri Venkateshwara, and ensure that no structure of any other religion is allowed to come up there.

Hindu activists in the region point out that when Ms. Sonia Gandhi violated the rules and entered the sanctum sanctorum of Tirumala Tirupati Devasathanam some years ago, without signing the mandatory declaration for practitioners of other religions; she was facilitated in this outrage by the then TTD executive officer Ajay Kallam. The activists point out that according to the local bush telegraph, Mr. Ajay Kallam and some of his family members converted to Christianity some time ago, and this fact may have some bearing on some of their public actions. For instance, Mr. Kallam sought to auction hundred acres of land belonging to the Hathi Ramji Matham (Tirumala) a year ago, and it was only with difficulty that the auction was eventually cancelled.

The point being made is that it is a terrible sacrilege that State control of Hindu holy sites enables non-Hindus to seize control of major temples and run them according to an undisclosed agenda. Non-believers have infiltrated critical areas of these institutions. It is already a matter of considerable concern that the enormous revenues of Hindu temples in south India are being misused to fund the Hajj subsidy and renovate churches, while temples and priests remain starved of basic funds. Now more than ever before there is need to expedite the return of the temples to the community.

According to field activists, an official scrutiny of lands and properties acquired by evangelical organizations may shed interesting light upon a phenomenon best dubbed as ‘colonization through land ownership.’ The value of the properties and the costs of the gigantic bureaucracies associated with them would be an eye-opener. It is instructive, for instance, to drive through the Coromandel Coast from Vishakapatnam to Toottukkudi, and observe the plethora of churches proliferating along the route; most are new constructions. A journey to Guntur and Eluru may be similarly instructive.

The Andhra Pradesh Government is a wholly unsuitable custodian of Tirupathi and must be made to surrender control of this holy shrine. Some time ago it condoned the demolition of the 550-year old Thousand Pillar Temple for no good reason. A Government that lacks the sense of the sacrality of the seven hills which have been regarded as a tirthasthanam and devasthanam from time immemorial cannot be allowed to preside over its destiny.

July 22, 2005

Recently there was an informal chat among Intelligence community and experts in India about the chances of a joint US-Britain-India task force on Pakistan terror , say, after Blair and Bush recognize that without India's help this task force will be a flop. One has even suggested to join "Aliance Base" , top secret center in Paris, code-named Alliance Base . This intelligence centre was set up by the CIA and French intelligence services in 2002 . "Such joint intelligence work has been responsible for identifying, tracking and capturing or killing the vast majority of committed jihadists who have been targeted outside Iraq and Afghanistan since the Sept 11, 2001, attacks"

The Alliance Base is headed by a French general working for the General Directorate for External Security (DGSE), the French equivalent of the CIA. The base has officers from Britain, France, Germany, Canada, Australia and the United States.

"Could a similar set up be envisaged between US/Britain and India - which had been subjected to hundreds of terrorist attacks during the past decades - and the United States? " questioned an journalist . The response was "If you join with Britain now, India will end up having to defend the British. "

Here is an explanation from an expert ." My view based both on personal contact and public postures: Britain is a rapidly declining power, not so much for its weak military as for its weakening morale and the political will to fight evil. "

"British inclination to compromise rather than confront is an an admirable quality in dealing with reasonable people. But it is not going to work with Islam. See how even after two attacks within two weeks, Blair and others don't want to mention the word Jihad. This suits the Muslim leaders fine. They can hide behind vague noises about extremism, fanaticism and the like, while the mosques and Mardasas can keep preaching Jihad."

"See the latest statements by the Mayor of London. He blames British Government policy in Palestine and Iraq-- not the teachings of Islam! He is just mouthing Muslim rhetoric. This is what Britain has come to. "

"A few more threats and bombs will bring Britain to its knees. You want an alliance with these people? It will be back to the days of the Empire, with Indian soldiers protecting the British Empire."

What is happening with the Italian court in Delhi-- at 10 Janpath

Note that this is what is happening with the Italian court in Delhi-- at 10 Janpath. Sonia is appeasing Muslims at every turn-- from the Imrana case to Sharia to Ayodhya, but she wants Indian (meaning Hindu) men to provide security for her and her family. Will she hire Muslims to be her bodyguards?

" Please understand what is going on: Sonia the "super PM" is super-terrified of Muslim violence. She knows that they pose the greatest threat to her safety. Petrified by this fear, she will never say no to any Muslim demand. Her Law minister Bharadwaj came out with the statement that the Government cannot interfere in the Imrana case and cannot consider a Uniform Civil Code. So you have parallel courts in India. Mark my words, the same will be happening in Britain. Already, 200 Mullahs in Britain have issued "fatwas" against the terrorists. It won't deter the terrorists but indirectly legitimizes the Mullah's right to issue fatwa, which is a judicial ruling. Will they stop here? Hardly! " said an expert who is close to power circles in Delhi .

Coming back to Sonia, have you ever heard her mention the word Jihad? She is too terrified-- that it may be turned against her. This fear is why she ran to Oxford immediately after Godhra and not long after 9/11, to give a lecture at the Oxford Center for Islamic Studies. She could not so 'No' to the invitation.

She will answer every summons and every demand from any Muslim group. Just like Musharraf, whose security depends on staying in uniform, Sonia's security depends on having Hindus protecting her. Sonia is not a strong leader-- she is a weak person in a powerful unconstitutional position. Everyone knows this, but no one seems to know how to expose this. Newspapers don't want to put this in black and white.

Once this becomes a matter of public debate, she is finished. The best way, worldwide (and not just India) is to force a public debate on Jihad. But Britain and Blair are going in the opposite direction-- passing a blasphemy law that bans giving offense to religions. Who do you think will use this-- Muslims or Hindus, Christians and Jews in England?

If you join with Britain now, India will end up having to defend the British.

On Sonia's Weakness

Sonia serves anyone who can blackmail and threaten her-- the Russians, the Muslims. We should not mistake her desperation for strength. This what makes her a national security threat: with so many fears and so many skeletons in her closet, she is a candidate for blackmail. Her "allies" will want her to stay as long as she keeps laying golden eggs. Note that she rushed to see Putin during the Paris Air show, where the big news was India shopping for military aircraft. India is flush with foreign exchange and Russia is in desperate need for it. Putin is a KGB veteran. Don't you think he would put pressure on her to deliver with some business? . KGP transferred $2 billion into her account. They will expect at least $20 billion, at 10% commission. It was obviously not meant as a charity.

The only way of breaking Sonia is to tie her to something so that powerful Western Governments go after her. One way is to expose her as close to Jihadi outfits.What is needed is a series of columns that force Sonia to take a stand on the Islamic terror-- topics like Jihad, not vague statements about extremism, secularism, fundamentalism and the like. Force her to take a stand on Jihad-- something that will draw the ire of Muslims. Her white skin is the only thing Sonia has going for her. Forget the dynasty-- it is her white skin.

Metal Storm Limited announced that it has been awarded a contract in the United States from The Boeing Company.

The contract was let to Metal Storm for the purpose of conducting a study to determine capability specifications for a weapon system that will meet unique user requirements. The specific details of the contract remain confidential.

Metal Storm CEO, Mr David Smith said "The Boeing Company's interest in Metal Storm has now been converted into an initial contract, with the potential to secure more significant opportunities. We are very pleased to be able to introduce our technology to one of the Defense Industry's leading players.

"This contract is evidence that Metal Storm's technology has now been positioned to better target the specific requirements of prospective customers.

"It further supports our position that Metal Storm has already moved some way towards our goal of taking the systems we own or are developing and integrate them with other echnologies.

"This contract rewards the significant engineering work undertaken recently by Metal Storm which has further readied our technology for commercial application," said David Smith.

Metal Storm Limited is a defense technology company engaged in the development of electronically initiated ballistics systems using its unique "stacked round" technology. The company is headquartered in Brisbane, Australia and incorporated in the US, with an office in Washington DC. The company has invented a ballistics technology that has no known conventional equivalent. Metal Storm is working with government agencies and departments,as well as industry, to develop a variety of systems utilizing the Metal Storm non-mechanical, electronically fired stacked ammunition system.

The rapid rise of the People’s Republic of China (PRC) as a regional political and economic power with global aspirations is one of the principal elements in the emergence of East Asia, a region that has changed greatly over the past quarter of a century. China’s emergence has significant implications for the region and the world. The United States welcomes the rise of a peaceful and prosperous China, one that becomes integrated as a constructive member of the international community. But, we see a China facing a strategic crossroads. Questions remain about the basic choices China’s leaders will make as China’s power and influence grow, particularly its military power.

The Chinese People’s Liberation Army (PLA) is modernizing its forces, emphasizing preparations to fight and win short-duration, high-intensity conflicts along China’s periphery. PLA modernization has accelerated since the mid-to-late 1990s in response to central leadership demands to develop military options for Taiwan scenarios.

In the short term, the PRC appears focused on preventing Taiwan independence or trying to compel Taiwan to negotiate a settlement on Beijing’s terms. A second set of objectives includes building counters to third-party, including potential U.S., intervention in cross-Strait crises. PLA preparations, including an expanding force of ballistic missiles (long-range and short-range), cruise missiles, submarines, advanced aircraft, and other modern systems, come against the background of a policy toward Taiwan that espouses “peaceful reunification.” China has not renounced the use of force, however. Over the long term, if current trends persist, PLA capabilities could pose a credible threat to other modern militaries operating in the region.

The PLA is working toward these goals by acquiring new foreign and domestic weapon systems and military technologies, promulgating new doctrine for modern warfare, reforming military institutions, personnel development and professionalization, and improving exercise and training standards. We assess that China’s ability to project conventional military power beyond its periphery remains limited.

This report outlines what we know of China’s national and military strategies, progress and trends in its military modernization, and their implications for regional security and stability. But, secrecy envelops most aspects of Chinese security affairs. The outside world has little knowledge of Chinese motivations and decision-making and of key capabilities supporting PLA modernization. Hence, the findings and conclusions are based on incomplete data. These gaps are, of necessity, bridged by informed judgment.

The PLA’s routine publication of a biannual Defense White Paper demonstrates some improvement in transparency. However, China’s leaders continue to guard closely basic information on the quantity and quality of the Chinese armed forces. For example, the U.S. Department of Defense still does not know the full size and composition of Chinese government expenditure on national defense. Estimates put it at two to three times the officially published figures.

July 21, 2005

The signs are unmistakable: America's "war on terror"is in jeopardy in Afghanistan, although the locus ofthe renewed Taliban-led efforts seems to be across theborder in Pakistan.

Playing favorites US and other Western government officials have alwaysbeen lavish in their praise of Pakistan's PresidentGeneral Pervez Musharraf. Indeed, Musharraf's supposedabout-turn on supporting the Taliban after theSeptember 11 attacks is now accepted without question.Most Taliban emerged from madrassas (seminaries) inPakistan. However, it has always been a reality thatMusharraf has treated the Taliban differently than hedid al-Qaeda. For instance, even though Pakistan hasarrested and handed over to the US many senioral-Qaeda leaders, not a single senior Talibancommander has been handed over by Pakistan to eitherthe US or the Afghan government.

It is an open secret in Pakistan that virtually theentire leadership of the Taliban military hierarchylives and operates out of the city of Quetta, which isthe capital of Pakistan's Balochistan province. Sincethe fall of the Taliban in Kabul in late 2001, Westernand Pakistani reporters have been able to interviewTaliban commanders and other leading figures wellinside Pakistan, especially around Quetta. Despite thedocumented facts, the Pakistan government has alwaysflatly denied the presence of Taliban commanders inQuetta, or elsewhere inside Pakistan for that matter.

Afghan angerThe Afghan government led by President Hamid Karzaihas for some time been angry at the role of Pakistanin the recent resurgence of the Taliban. In the run-upto the Afghan presidential elections last year, Karzaicomplained about Taliban bases inside Pakistan to USPresident George W Bush. In the days that followed,Bush reportedly had a quiet conversation withMusharraf, asking him to look into Taliban activityemanating from Quetta. The Taliban attacks endedalmost immediately.

The outgoing US ambassador to Kabul, Zalmay Khalilzad,was a staunch critic of Pakistan's support for theTaliban. However, his anger was especially evidentwhen he excoriated Pakistan a few weeks ago after aPakistani television network was able to interview aTaliban commander named Mullah Usmani. Khalilzadquestioned Pakistan's sincerity and wondered how atelevision network was able to talk to a Talibancommander even as Pakistani officials denied a Talibanpresence in the country. What was left unsaid was thatthe US government soon came to know that Mullah Usmanigave the interview not from the tribal areas ofPakistan on the border with Afghanistan, but from theport city of Karachi.

To add substance to the allegations, Anis, the Afghangovernment daily, noted in its June 23 issue thatTaliban were openly living in the Kachlogh andPashtunabad regions of Quetta, and based theirmilitary presence in those regions. The report quotedpeople who recently visited Quetta and adjoiningareas. The government-sponsored daily then went on toclaim that senior Taliban leaders lived in residentialblocks belonging to the Pakistani army in a placecalled Choni, which "is a military base and trainingcenter for the Pakistani army". Taliban commanderswere being ferried inside Pakistan by theInter-Services Intelligence directorate (ISI), thereport added.

Pakistan's fears Ahmed Rashid, a noted expert on the Taliban, recentlycommented that behind Pakistan's continuingsponsorship of the Taliban and their destabilizationefforts in Afghanistan lies a fear of India. Duringthe Taliban years after they came into power in 1996,Pakistan essentially shut out other countries fromAfghanistan. However, since the Taliban were deposed,India has moved into Afghanistan in a big way, withsponsorship of massive reconstruction projects, suchas building key roads, hydroelectric facilities,schools and hospitals. While this may not seemdangerous to most observers, Pakistan's ruling elitehave always taught themselves to see a sinister plotbehind every Indian effort and the idea of an Indianpresence on their Western borders accentuatesPakistani fears.

Pakistan's Urdu newspapers, whose content is tightlycontrolled by the government and intelligenceagencies, routinely publish stories of "Indian agents"being involved in the separatist violence inBalochistan, and even the sectarian attacks deepinside Pakistan. Pakistan's military commanders andother leaders have also continued to point the fingerat Indian "consulates" in the Afghan towns of Kandaharand Jalalabad as the source of troubles betweenAfghanistan and Pakistan. These fears, which manybelieve are unfounded, are used as a basis by thePakistani establishment to justify continued supportto the Taliban.

However, not many in Pakistan acknowledge what somesee as extraordinary efforts by the US to accommodatePakistani concerns in Afghanistan. To begin with, theUS had pressed the Karzai government to restrict itssecurity ties with India. The US also allowed Pakistanto veto a possible Indian military presence inAfghanistan, even though Indian troops there couldhave relieved the US of a tremendous burden, given theglobal American military deployment. Americandiplomats also pressured Karzai to curtail the powerof former Northern Alliance elements, many of whomhave been sidelined since 2004. This was done solelyto assuage Pakistani concerns.

After the Afghan presidential election last year, theUS negotiated a deal between the Karzai government andPakistan under which former Taliban leaders wouldreceive amnesty and be given roles in the governmentif they surrendered and renounced violence. For itspart, Pakistan was supposed to hand over seniorhardcore Taliban commanders to the Afghan government.However, when the time came for Pakistan to live up toits end of the bargain, the Musharraf governmentreneged. One former Western diplomat commented to AsiaTimes Online, "The Paks got greedy. They have figuredthat they need not settle for partial influence inKabul when they can use the Talibs to control most ofAfghanistan." The Pakistanis simply did not want tosee a strong central government in Kabul, the diplomatadded.

Musharraf's promise Western leaders tout Musharraf's speech to Pakistanisa couple of days after September 11, in which hejustified his decision to join the US side againstjihadis. But few seem to recall that Musharraf madeanother less publicized speech on September 19, 2001in Urdu, Pakistan's national language, in which hemade it clear that he would do everything within hispower to make sure that the Taliban emerged unharmedin the "war on terror". While the English-languagespeech was for Western consumption, the Urdu speechwas meant to assuage his countrymen regarding theTaliban. Whether the US wants to admit it or not, itis patent now that Musharraf has kept that particularpromise to protect the Taliban.

In a speech to the Australian Press Club in June thisyear, Musharraf justified Pakistan's support for theTaliban and insinuated that the US was to blame forSeptember 11 because of its refusal to engage theTaliban regime before that event. To some, this wasproof that the Pakistani establishment still felt thatsupporting the Taliban was in Pakistan's interests.

The former Western diplomat added that many in USmilitary circles were deeply unhappy about Pakistan'srole. The recent killing of US Navy special forcesoperatives and the downing of a US helicopter innorthern Kunar province of Afghanistan were thehandiwork not of the Taliban but of militiamen loyalto Afghan warlord Gulbuddin Hekmatyar, according tothe diplomat. Hekmatyar, who was based in Iran duringthe Taliban rule over Kabul, had now teamed up withTaliban commander Jalauddin Haqqani, both of whom werecurrently under the protection of the ISI, he said.

Musharraf and the Pakistani military establishment areunlikely to end their sponsorship of the Taliban,regardless of what the Afghan government or thecoalition field commanders in Afghanistan may say ordo. Some experts feel that it may be time for Bush toremind Musharraf that Pakistan can either be with theTaliban, or with the US - a choice that Musharrafsupposedly made in favor of the latter soon afterSeptember 11. Without such pressure, however, it seemscertain that America's Afghan project is inexorablyheading towards disaster.

Kaushik Kapisthalam is a freelance defense andstrategic affairs analyst based in the United States.He can be reached at contact@kapisthalam.com Source: http://atimes.com/atimes/Central_Asia/GG19Ag03.html

Two new terms, loaded with adversarial connotations, made their appearance in Moscow's discourse on Central Asia, in the context of demands to set a deadline on the use of military bases in that region by U.S.-led forces (see EDM, July 6, 7).

Elaborating on that demand, an official statement issued by Russia's Ministry of Foreign Affairs on July 15 termed those forces "non-regional," and went on to say that "such a military presence in the region must be rolled back (dolzhno byt svernuto)" (Interfax, July 15). Most English-language translations did not capture these nuances in the Russian original.

The stricture against "non-regional forces" looks like a Russian Ministry of Foreign Affairs borrowing from Tehran. This term has long been a fixture in Iran's official rhetoric against the Western presence in the Caspian region and Central Asia. This usage has not been a characteristic of Russian pronouncements until now.

"Roll-back" adds a heavy emphasis to the demand, first made on July 5, for setting a deadline for using the bases. That and follow-up statements had sounded more restrained, calling as they did for discussion of a timeframe for the presence, not rollback. This loaded Russian term entered diplomatic history through the recollections of Milovan Djilas, who cited Stalin ordering in 1948 that a certain operation in the Balkans must be svernuto ("rolled back").

The Russian Ministry's July 15 statement did maintain the linkage between the coalition's operations in Afghanistan and the use of Central Asian bases, but seemed to loosen that linkage by implying that completing the mission in Afghanistan and withdrawing from Central Asia are parallel processes. This seems to suggest that Moscow would be content with a drawdown of coalition forces, leading to their withdrawal from Central Asia, rather than a single-move pullout.

Moscow's statement took issue with General Richard Myers, chairman of the U.S. Joint Chiefs of Staff, who had on the preceding day told U.S. media, "Two very large countries [Russia and China] were trying to bully some smaller countries" into imposing time limits on the coalition forces' use of bases in Central Asia. Myers was referring to the Shanghai Cooperation Organization's (SCO) July 5 summit in Astana, Kazakhstan, where Russia and China initiated that demand. Russia's Ministry of Foreign Affairs countered by claiming, "As is well known, SCO decisions are made by consensus and reflect the member countries' collective opinion" (Interfax, July 15).

However, Kyrgyzstan's President-elect Kurmanbek Bakiyev inadvertently confirmed that he had simply followed Russian President Vladimir Putin's lead: "Vladimir Vladimirovich had raised the issue, and I said yes," Bakiyev admitted on live television (RTR Russia TV, July 17). Following the SCO summit, Bakiyev and other Kyrgyz officials reiterated the call for a deadline to the U.S.-led military presence. The prospective prime minister, Felix Kulov, has however adopted a more nuanced position.

In Tajikistan, the French ambassador and military attaché and the Pakistani ambassador have taken to the airwaves to underscore the need for a continued presence of coalition forces in the country (Avesta, July 14, 15).

In Uzbekistan, the state's mass media continue severely criticizing the U.S. reaction to the May terrorist rebellion and crackdown in Andijan, and in this context are portraying the U.S. air base as an economic and ecological liability to the country. The media are also publicizing officially inspired messages from ordinary citizens portraying the base in that light (Khalk Sozi, Adolat, Narodnoye slovo, July 14, 15). However, articles generally stop short of calling for withdrawal of U.S. forces. Uzbekistan has declined to participate in the staff-level exercise, focused on counterterrorism and border security, hosted by the U.S. Central Command in Suffolk, Virginia on July 14-27.

On July 20, Kyrgyzstan's Ministry of Defense announced that U.S. Defense Secretary Donald Rumsfeld is expected to arrive on July 25. Rumsfeld will discuss the future of the U.S.-led air base Manas with the new Kyrgyz leadership, in the wake of Moscow- and Beijing-inspired demands to set a deadline on the presence of U.S.-led coalition forces in Central Asia. Meanwhile, French Defense Minister Michèle Aliot-Marie is arriving in Tajikistan on July 22 hoping to firm up the arrangements for French use of the Dushanbe and possibly also Kulob airports.

For its part, on July 20 Moscow again urged the Central Asian governments, through Collective Security Treaty Organization Secretary-General Nikolai Bordyuzha, to raise with the United States the issue of a deadline to the U.S.-led coalition's presence, in line with the Shanghai Cooperation Organization's (SCO) declaration at the July 5 summit in Kazakhstan (see EDM, July 6).

"Bullied by two big countries" [Russia and China], as General Richard Myers, Chairman of the U.S. Joint Chiefs of Staff, remarked, Kyrgyzstan and Tajikistan now seem to be trying to wiggle out of a Russo-Chinese vise. In the wake of the July 5 summit, Kyrgyz President Kurmanbek Bakiyev and Minister of Foreign Affairs Roza Otunbayeva toed Moscow's line and repeated, on Kyrgyzstan's behalf, the demand for a deadline to the U.S. presence. Other Kyrgyz officials, however, have begun finessing that demand, even reinterpreting it to permit continuation of the status quo.

Thus, Bakiyev's press spokesman, Avazbek Atakhanov, argues that the SCO summit's declaration only referred to coalition bases in Central Asia as a region, without naming any country. The implication is that Kyrgyzstan is not bound by that document. The spokesman's interpretation in effect reverses Bakiyev's acceptance of that document with a public bow to "Vladimir Vladimirovich" [Putin]. Atakhanov stated that he was speaking on Bakiyev's behalf. The president himself, however, has yet to adjust his position. (Interfax, Kyrgyz Radio, July 18).

Some key members of the ruling circles seem inclined to approve the further operation of the American air base without significant changes. They signal such a preference as part of larger calculations to continue Kyrgyzstan's established policy of balancing among Russia, China, and the United States. "This is where the interests of the three great powers intersect. We have to ensure that our security and economic interests are protected," said Kyrgyzstan's Security Council Secretary, Miroslav Niyazov, citing the government's intention to "do its best to avoid spoiling relations with Washington." In a similar vein, Bakiyev's adviser Bolotbek Shamshiyev went on record to rule out any significant change of policy toward the United States, including on the issue of the air base (AFP, July 16; Institute on War and Peace Reporting Report no. 396, July 15).

The prospective Kyrgyz Prime Minister, Felix Kulov, went on record early on as favoring both the continuation of the status quo regarding the American air base and the introduction of a Russian military "presence" (as distinct from base) in Osh. "Kyrgyzstan should conduct a multi-layered policy, to become a country where relations between the great powers meet and harmonize." Along with some other officials, Kulov cites the ongoing, worldwide terrorist attacks as an argument for the continuing operation of Manas: "Events in London show that international terrorism can not be defeated any time soon. The issue of a time-line [for Manas] is closely linked with such events that are taking place not only on our continent, but also elsewhere" (Kyrgyz TV Channel One, July 14; AFP, July 16).

Kyrgyzstan's Acting Defense Minister, General Ismail Isakov, met with U.S. Ambassador Stephen Young on July 20 in preparation for Rumsfeld's visit. The Ministry's press release -- and local reports based on it -- seems to contain the outline of a solution. The United States would be expected to continue financial and security assistance to Kyrgyzstan for an extended period, in return for open-ended American use of the Manas air base (Kabar news agency, Interfax, July 20).

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